Sunday Ehigiator
Nigeria’s economy is projected to grow by 4.2 per cent in the second half of 2026, driven by higher crude oil production and stronger performance in dominant sectors, but the country is struggling to translate recent macroeconomic stability into inclusive growth, PricewaterhouseCoopers (PwC) has said.
The assessment was contained in its H2 2026 Nigeria Economic Outlook, titled “Unlocking Nigeria’s Reform Dividend: From Macroeconomic Stabilisation to Inclusive Growth.”
The report said Nigeria had recorded significant gains in macroeconomic stabilisation, including improved foreign exchange stability, moderating headline inflation, stronger external reserves, increased revenue mobilisation, higher capital inflows and resilient economic growth.
However, it warned that structural constraints and the transitional costs of reforms continued to limit the impact of those gains on households and businesses.
“Macroeconomic stabilisation has improved, but structural constraints and reform-transition pressures have moderated the pace of inclusive growth,” the report stated.
According to PwC, real Gross Domestic Product (GDP) grew by 3.89 per cent year-on-year in the first quarter of 2026, compared with 3.13 per cent in Q1 2025.
It attributed the expansion largely to ICT, Finance and Insurance, Construction and Agriculture, which grew by 10.98 per cent, 8.54 per cent, 6.38 per cent and 3.15 per cent respectively.
ICT growth was supported by rising data usage and broadband adoption, while stronger financial intermediation and digital transactions boosted Finance and Insurance. Construction benefited from increased infrastructure and building activity, while Agriculture was supported by higher crop production.
Despite the growth, PwC said performance remained weak in some sectors, with electricity contracting by 15.30 per cent amid lower generation availability, while Oil and Gas grew by only 2.57 per cent.
Trade and Real Estate also recorded relatively weak growth of 2.08 per cent and 2.29 per cent respectively, reflecting high operating, logistics, financing and building costs.
On inflation, the report said headline inflation eased marginally to 15.91 per cent year-on-year in June 2026 from 15.93 per cent in May. Core inflation also declined to 15.92 per cent from 16.82 per cent, while transport inflation fell to 15.62 per cent from 17.09 per cent.
However, food inflation moved in the opposite direction, rising to 17.52 per cent from 16.96 per cent, with month-on-month food inflation accelerating to 3.75 per cent from 2.98 per cent.
PwC attributed the increase to higher prices of tomatoes, fresh pepper, crayfish, garri, yam, cassava flour, cowpea, beef and other staples.
The report said the cost of a healthy diet increased by 4.68 per cent year-on-year to N1,589 per adult per day in April 2026, from N1,518. It consequently called for measures to improve agricultural productivity, storage and logistics and reduce the cost of nutritious food.
“Sustaining disinflation and easing food and other household essential costs will provide greater relief to household budgets. This will strengthen purchasing power, support consumer spending and contribute to broader economic growth,” it said.
PwC further said animal-source foods accounted for 40 per cent of the cost of a healthy diet, while fruits and vegetables accounted for 16 per cent and 14 per cent respectively.
The report projected Nigeria’s poverty rate at 63 per cent in 2026, warning that recent macroeconomic stabilisation had produced limited welfare gains. It also said undernourishment had risen from 10.8 per cent in 2015–2017 to 19.9 per cent in 2022–2024.
“Scaling targeted household support, reducing food supply and distribution costs, and supporting private-sector job creation will help raise household purchasing power and broaden welfare gains,” the report stated.
PwC also identified rising energy costs as another source of pressure, noting that diesel prices increased by 43.67 per cent year-on-year in April 2026, kerosene by 34.12 per cent, Premium Motor Spirit (PMS) by 23.69 per cent and Liquefied Petroleum Gas (LPG) by 10.43 per cent.
It said higher diesel and PMS prices were increasing transport, logistics and business operating costs, while kerosene and LPG increases were placing additional pressure on household energy expenditure.
The report said the naira remained broadly stable in June, with the official NFEM rate closing at N1,379.68/$, compared with N1,385/$ in the parallel market. It said improved official-market liquidity, stronger external buffers and ongoing FX-market reforms supported the stability.
NFEM turnover rose by 43.6 per cent month-on-month to $12.92 billion in June from $8.99 billion in May, while foreign reserves rose by 38.3 per cent year-on-year to $51.46 billion, from $37.21 billion in June 2025.
However, PwC cautioned that the stability remained vulnerable to portfolio-flow reversals, oil-price volatility and intervention pressures.
Nigeria also recorded a sharp increase in capital inflows, which rose by 83.8 per cent year-on-year to $10.37 billion in Q1 2026. But PwC said the composition of the inflows remained a concern.
Foreign Portfolio Investment (FPI) accounted for $9.86 billion, representing 95.1 per cent of total inflows, while Foreign Direct Investment (FDI) stood at only $135.08 million, or 1.3 per cent.
The report said portfolio investment was concentrated in money market instruments and bonds, which attracted $6.50 billion and $3.23 billion respectively. “The opportunity is to translate this investor interest into more long-term capital,” PwC stated.
It called for greater policy certainty, a stronger pipeline of bankable projects and a competitive operating environment to attract FDI into businesses and infrastructure.
The report also recorded a substantial improvement in Nigeria’s trade balance. Nigeria posted a N7.55 trillion trade surplus in Q1 2026, up from N3.95 trillion in Q1 2025. Exports reached N21.17 trillion while imports declined to N 13.62 trillion, bringing total trade to N34.79 trillion.
However, PwC noted that the improvement was driven more by lower imports than broad-based export expansion. Imports declined by 18.2 per cent year-on-year, while exports increased by only 2.8 per cent.
Crude oil exports stood at N11.20 trillion, accounting for 52.9 per cent of total exports, while mineral products represented 85.8 per cent. Non-oil exports accounted for only 15.1 per cent.
Government revenue also recorded gains, with gross tax and related revenue increasing by 23.2 per cent year-on-year to N7.44 trillion in Q1 2026. However, collections missed the target by N2.24 trillion, while overall revenue collections achieved only 76.9 per cent of the target. PwC warned that sustained revenue shortfalls could increase government financing requirements, borrowing and debt-service pressures.
On debt, the report said Nigeria’s debt-to-GDP ratio declined by 4.2 percentage points to 38.7 per cent in 2025 from 42.9 per cent in 2024. Debt service-to-revenue also eased slightly to 49.2 per cent from 50.3 per cent.
Nevertheless, it described debt service as “the key fiscal vulnerability”, noting that nearly half of government revenue was still being absorbed by debt payments.
PwC identified limited access to affordable credit as a major barrier to private-sector growth. Private-sector credit stood at only 21.3 per cent of GDP, below the Sub-Saharan African average of 33 per cent and lower-middle-income average of 47 per cent.
It identified a major financing gap for businesses seeking between N500,000 and N30 million, noting that most MSMEs seeking smaller facilities were underserved while commercial banks tended to focus on larger loans.
“A significant financing gap persists for MSMEs seeking facilities of N500,000 to N30 million, leaving many businesses underserved,” it stated. The report recommended targeted credit windows, partial credit guarantees and blended finance to expand access to affordable, longer-tenor credit. It also found that government credit increased by 18 per cent between December 2025 and May 2026, compared with 6.9 per cent growth in private-sector credit.
Insecurity emerged as the biggest business constraint in PwC’s assessment, scoring 72.9 in May 2026. This was followed by high or multiple taxes at 70.3, high interest rates at 67.7 and bank charges at 64.1.
The report said insecurity continued to affect logistics, market access and operating continuity, while tax and financing costs weakened business competitiveness.
“Targeted improvements in security, tax administration and access to finance can create better conditions for MSME expansion,” it said.
PwC also highlighted Nigeria’s infrastructure deficit as a major obstacle to productivity. The country ranked 68th out of 70 economies in the 2026 IMD competitiveness ranking, with an overall score of 38.8.
On infrastructure, Nigeria ranked 70th out of 70, with a score of 5.21. “Government should prioritise power reforms, transport upgrades, broadband expansion, and stronger security coordination to lower business costs and raise productivity,” the report stated.
The electricity sector, according to the report, continued to suffer from metering gaps, commercial losses and liquidity challenges. Only 7.32 million of 12.38 million active customers were metered, leaving a gap of 5.06 million customers. The report said only N597.56 billion of N955.19 billion worth of energy supplied in Q1 2026 was collected.
Aggregate Technical, Commercial and Collection (ATC&C) losses stood at 37.44 per cent, more than 20 percentage points above the efficient-loss target of 16.92 per cent. The Federal Government absorbed 51.95 per cent, or N358.32 billion, of the N689.72 billion GenCo invoice through subsidies.
PwC said reducing losses, accelerating metering and improving collections would strengthen sector liquidity and reduce pressure on public finances.
PwC said the task in the second half of 2026 should be to transform macroeconomic stability into tangible welfare and productivity gains.
It identified four broad priorities: supporting consumers, sustaining MSMEs, unlocking productivity gains and converting investor interest into productive investment.
The report recommended targeted household support, measures to reduce food and energy costs, affordable longer-term private-sector credit, improved security, reduced multiple taxes and stronger infrastructure.
It also called for faster execution of projects by addressing approval, land, financing and FX bottlenecks that delay investments from becoming operating capacity and jobs.
PwC further urged the government to improve FDI conversion by reducing approval delays, strengthening regulatory predictability and protecting investors from abrupt policy changes.
On the H2 outlook, it expects inflation to moderate, although supply-side shocks and pre-election spending could create upward pressures. It also expects the naira to remain broadly stable, while warning of potential volatility from global oil prices, capital flows and domestic FX demand.
